DECA Finance Exam 2014

1. Allison just started her own photography business. She will be working alone, and she doesn't anticipate many business expenses or lawsuits. Which type of business ownership is best for Allison? A. Partnership C. Corporation B. Limited liability company (LLC) D. Sole proprietorship

1. D Sole proprietorship. Sole proprietorships are businesses with just one owner. They are typically the easiest type of business to start. However, the business owner is legally responsible for all debts and lawsuits. Since Allison is starting a business by herself and doesn't expect many lawsuits, a sole proprietorship is ideal for her. A partnership is similar to a sole proprietorship, except that it involves two business owners. A corporation is a separate legal entity owned by shareholders. The corporation itself is responsible for debts and legal actions. Corporations are complex and usually recommended for much larger businesses than Allison's. Limited liability companies (LLCs) combine features of corporations and partnerships. They make more sense for business owners who have a large amount of debt or a higher risk of being sued.

10. Edith wants to organize the information in her persuasive paper in a clear, logical way that's easy for readers to understand. She starts by stating the dilemma at hand and then explains the answer that she believes will solve the dilemma. Which method of organizing information is Edith using? A. Deductive C. Problem/Solution B. Alphabetical D. Chronological

10. C Problem/Solution. The problem/solution method of organizing information first states the problem and then explains the solution. Alphabetical order arranges facts in the order of the alphabet. Deductive order begins with the recommendation or conclusion and follows with facts or examples to support it. Chronological order organizes information into a sequence of dates.

100. Because __________ risks are difficult to control, businesses often __________ to develop strategies that lessen the effects of these risks. A. external; prepare financial statements C. internal; develop feasibility models B. external; conduct environmental scans D. internal; perform competitive analyses

100. B External; conduct environmental scans. Businesses cannot control external factors such as economic, competitive, regulatory, and political situations. External changes can present risks for businesses. To handle external risks, businesses should be aware of these issues and take steps to mitigate their negative effects. To do this, businesses conduct environmental scans. Environmental scanning is the process of collecting information about the environment surrounding the business. Preparing financial statements will not help the business lessen the effects of external risks. Internal risks are easier for businesses to control than external risks.

11. Garret is writing persuasive letters to several businesses to ask them to donate merchandise for an upcoming auction to benefit the high school marching band. He closes his letters by saying, "Please call our band's secretary today to donate." Which persuasive message technique is Garret using? A. Call to action C. Establishing credibility B. Storytelling D. Grabbing attention

11. A Call to action. When writing persuasive messages, it can be helpful to close with a call to action. This reminds the reader of what you want them to do—in Garret's case, it reminds business owners that the band needs their donations. Storytelling, establishing credibility, and grabbing attention are other techniques that can be used in persuasive letters, but they are not used in Garret's example.

12. When writing an executive summary, be sure that you A. target people who don't have time to read the full report. B. use as much business jargon as possible. C. make the summary at least 1/10th as long as the full report. D. include every point from the full report.

12. A Target people who don't have time to read the full report. Executive summaries are written for people who don't have the time (or inclination) to read the full report. You should avoid using business jargon— instead, write as clearly and simply as possible. The summary should be no more than 1/10th the length of the full report. You do not need to include every point in your summary; instead, just cover the major points.

13. Penelope wants to use an interactive channel to communicate with her employees. Which channel of communication should she choose? A. A voice mail C. A letter B. A phone call D. A report

13. B A phone call. Interactive communication goes two ways. There is a back-and-forth conversation involved, like on a phone call. Voice mails, letters, and reports are considered static communication because they do not involve interaction. If Penelope wants to use an interactive channel of communication, she should call her employees. She might also consider talking to them in person.

14. Margot just started a new job, and she has many meetings coming up with lots of different clients. Since her company deals with people from all over the world, Margot's boss tells her to be especially sensitive to cultural differences when speaking with clients. Which of the following things should Margot be sure to do: A. Assume that everyone in a particular culture will act in a certain way B. Communicate with everyone the same way, no matter what their cultural background C. Conduct as much research as she can about the cultural backgrounds of her clients D. Look at it as an opportunity to teach clients how her culture does business

14. C Conduct as much research as she can about the cultural backgrounds of her clients. Communicating with people of different cultural backgrounds can be tricky but is also very beneficial. Margot can help her company by researching the cultural backgrounds of her clients. People from different countries and backgrounds may communicate differently than people from her culture, so it is helpful for her to know what to expect. However, this doesn't mean that everyone in a particular culture will act the same way. People are still individuals and should be treated as such. Communicating with everyone in the same way, despite cultural background, is not an effective strategy. People from different countries and cultures may have different attitudes and ways of conducting business, and Margot will need to take that into account when communicating. She should not look at these conversations as opportunities to teach clients about her culture; instead, she should learn about their culture and try to communicate effectively

15. Kwame runs an organic meal delivery service. He wants his customers to be able to depend on him to consistently deliver high-quality, healthy food that will simplify their busy lives. This is his company's A. company promise. C. brand promise. B. touch point. D. brand point.

15. C Brand promise. A brand promise is a business's agreement (spoken or unspoken) with its customers that it will consistently meet their expectations and deliver on its characteristics and values. Kwame promises his customers that he will deliver the quality of food and service that they expect. Touch points are all the opportunities that businesses have to connect with customers and reinforce their brand value. Company promise and brand point are not terms commonly used to refer to brand promise.

16. The primary responsibility of all financial-services providers is A. lobbying the government on behalf of the industry. B. purchasing and selling securities. C. improving the community's standard of living. D. growing and protecting their clients' wealth.

16. D Growing and protecting their clients' wealth. Because financial-services providers (e.g., financial planners, bankers, and insurance agents) provide and manage financial products, they have the responsibility to grow and protect their clients' wealth. Finance professionals do this by providing sound financial advice and suggesting appropriate financial products to customers. Depending on a particular client's needs and the financial-service provider's product line, an appropriate financial product may include securities. By growing and protecting their clients' wealth, financial-services providers help their clients maintain or improve their standard of living. Lobbying the government is not a primary responsibility of all financial-services providers.

17. Before a financial planner can recommend an appropriate financial product to a client, s/he must A. determine the client's needs. C. assess the client's qualifications. B. set the client's goals. D. seek advice from experts.

17. A Determine the client's needs. Because clients have different financial circumstances and goals, it is important for a financial planner to ask questions and get the necessary information to determine a client's specific needs. By determining the client's specific needs, the financial planner can recommend appropriate financial products. When a financial planner shows that s/he is sincerely interested in his/her clients' best interests, s/he is more likely to develop long-term relationships with her/his clients. And, loyal clients are more likely to recommend their financial planners to others, which often results in additional business for the financial planners. Financial planners provide advice about realistic financial goals; however, the clients are ultimately responsible for setting their goals. If the financial planner does not have a product that will satisfy a client, s/he should refer the client to someone who has the knowledge or expertise to help the client. This only can happen after determining the client's needs. A client assesses a financial planner's qualifications rather than the other way around.

18. It is important to perform data-cleansing processes in customer databases to A. increase data reliability. C. create new data fields. B. ensure customer satisfaction. D. optimize transactional feeds.

18. A Increase data reliability. The data-cleansing process removes and/or consolidates duplicate records, updates expired data, and completes incomplete data fields. Businesses use data-cleansing applications to ensure that their customer databases contain useful, reliable, and accurate data. When a business's customer database is current and up-to-date, it operates more efficiently, which saves time and money. Conducting data cleansing processes does not ensure customer satisfaction, create new data fields, or optimize transactional feeds.

19. The Middleton Company uses customer relationship management (CRM) software to categorize customers by their sales-dollar volume over a specific period of time. In this situation, the Middleton Company is using __________ analytics to segment customers. A. differed C. product B. demographic D. profitability

19. D Profitability. Customer relationship management (CRM) analytics can be used to analyze and evaluate customer data in many different ways. For example, a business can use CRM technology to segment its customers into groups on the basis of the amount of money they spend with the business over a specific period of time (e.g., by quarter or year). This helps the business analyze the profitability of their customers. Companies may use this information to develop promotional programs for each category of customer to build loyalty. Demographic segmentation considers factors such as age, education, gender, etc. There is not enough information to determine if the company is analyzing product usage in relation to sales-dollar volume. Differed analytics is a fictitious term.

2. Andrew received an official-looking email that appeared to be from a government agency. The message requested that Andrew reply immediately to the email and provide his bank account information and credit-card account numbers. Fortunately, Andrew found out that the message was fraudulent before he provided the information. What illegal activity does this situation exemplify? A. Affinity fraud C. Phishing B. Ponzi scheme D. Accounting fraud

2. C Phishing. Phishing is an online identity-theft scam that fools its victims into believing they are submitting sensitive, personal information such as bank or credit-card numbers to a legitimate website. A Ponzi scheme is an investment scam that lures new investors by promising high rates of return with little to no risk. Accounting fraud occurs when a company or organization knowingly publishes incorrect information on its financial statements. Affinity fraud is an investment scam in which the scammer claims to be a member of the group s/he is targeting. By claiming to be a member of the group, the target audience is more likely to trust the scammer and turn over its money to him/her.

20. What is one way that a business can create or enhance place utility? A. Order or manufacture products before they are needed B. Offer customers financial assistance, such as credit or loans C. Research locations where customers expect to find products D. Add new features to existing products

20. C Research locations where customers expect to find products. To create or enhance place utility, businesses must figure out where customers expect to find products. This way, the business can plan and move the product to the right place—the place where customers will purchase the product, which is likely to be the place where the producer or service provider will make the most sales. Offering customers financial assistance creates possession utility. Ordering or manufacturing products before they are needed creates time utility. Adding new features to existing products creates form utility.

21. A store has a great deal on new tires, but Aileen doesn't have a car. She doesn't purchase the tires because they don't have any __________ for her. A. elasticity C. utility B. buying power D. equilibrium

21. C Utility. A product that has utility will satisfy a customer's wants or needs. If a product provides satisfaction—if it is useful or needed—there will be a demand for it. However, the usefulness of a product depends on the consumer. Since Aileen doesn't have a car, new tires don't have any utility for her. Buying power is the amount of money available. If consumers do not have money to spend, they cannot buy products. Elasticity is an indication of how changes in price will affect changes in the amounts demanded and supplied. Equilibrium is the point at which the quantity supplied is equal to the quantity demanded.

22. When Marlon buys a new oven for his bakery, he receives a three-year warranty from the oven company. If the oven breaks or has any problems within three years, the company promises to repair or replace it free of charge. This is an example of __________ business risk. A. transferring C. preventing/controlling B. avoiding D. retaining

22. A Transferring. Contractual agreements, such as warranties, are one way to transfer risks to another person or business. This option enables businesses to move forward with their decisions without bearing the risks involved. Marlon might not be able to afford to pay for a new oven if this one breaks, but because he's transferred the risk to the oven company, he knows they'll replace it if he has any problems. Avoiding risk is demonstrated by not taking a chance, as a risk not encountered presents no danger. Preventing or controlling a risk happens when a business takes measures to prevent or reduce the risk. Businesses retain a risk if they do nothing to reduce or eliminate it.

23. In some states, businesses pay a percentage of their profits in taxes, no matter how much they make. This is known as a(n) __________ tax. A. fair C. sales B. excise D. flat

23. D Flat. A flat tax is an income tax in which the same rate applies to all businesses, no matter how much they make in profits. Although many people think this tax is fair, it is not called a fair tax. An excise tax is a tax on certain products that is built into the overall price that consumers pay. A sales tax is a percentage of retail sales, paid by consumers.

24. A company outgrows its current location, so it decides to purchase a larger building. This purchase is considered a A. specialization. C. capital investment. B. division of labor. D. gross domestic product.

24. C Capital investment. When a company purchases a new building, it is making a capital investment. Capital investment is the amount of money the business has invested in its goods and other property. If a business outgrows its existing workspace, it is likely to move to a larger facility where it can be more productive. Division of labor is the division of a large job into smaller tasks that are done by different workers. Specialization is a form of efficiency—making the best use of the resources available. When a business specializes, it produces the good(s) or service(s) it is best able to produce with its resources. Everything that a country produces within its borders in a year is called its gross domestic product (GDP).

25. Which of the following is an accurate way of describing someone with emotional intelligence: A. A person who recognizes and manages emotions B. A person who becomes emotional very easily C. A person who ignores his/her emotions D. A person who has a high IQ

25. A A person who recognizes and manages emotions. Emotional intelligence is the ability to recognize and manage emotions in ourselves and others. It is usually described as being aware of your own emotions, responding to them appropriately, and then doing the same with the emotions of other people. Emotional intelligence is not the same thing as being an emotional person. It is also not the same thing as ignoring emotions. A person's IQ is his/her intelligence quotient, which is not the same thing as emotional intelligence

26. When Olivia has a meeting at work, she displays confidence, speaks with authority, and clearly communicates her ideas to improve the company. Olivia demonstrates A. adaptability. C. assertiveness. B. empathy. D. self-control.

26. C Assertiveness. The ability to express yourself, communicate your point of view, and stand up for your rights, principles, and beliefs is known as assertiveness. Assertive people display confidence and speak with authority. Empathy is the ability to put yourself in another person's place and to see things from his/her point of view. It involves sensitivity to, concern for, and understanding of others. Adaptability is the ability to adjust to changing situations. In other words, adaptable people are flexible. Restraint of your feelings, words, and actions is known as self-control.

27. Which of the following actions is something a positive person would do: A. Hold a grudge against a friend who messed up B. Blame a mistake on a coworker C. Complain about running into traffic on the way to work D. Listen and pay attention while a coworker speaks

27. D Listen and pay attention while a coworker speaks. Positive people are respectful, and this includes listening and paying attention to the people around them. Positive people accept responsibility for their mistakes instead of blaming them on others. They don't complain about problems, disappointments, or unexpected setbacks. Positive people are also understanding and accepting of others, so they will forgive a friend instead of holding a grudge.

28. A customer isn't happy because the vacuum cleaner she just purchased at Marta's store doesn't work. Marta understands how her customer feels because she's been upset about defective products before, too. Marta can relate to her customer because she has A. empathy. C. codependence. B. sympathy. D. tact.

28. A Empathy. Empathy is the ability to put yourself in another person's place. Empathetic people are able to relate to the feelings, thoughts, and experiences of other people. Marta can relate to her customer's problem because she's empathetic. Sympathy is the ability to recognize another person's feelings. If Marta was sympathetic, she would feel bad for her customer, but she wouldn't necessarily relate to how the customer was feeling. Codependence involves compromising your own needs in order to care for another person. Tact is the ability to do or to say the right thing in any circumstance. Although tact is important when dealing with customers, Marta isn't demonstrating it in this example.

29. Keegan is taking a business course, but he doesn't like his instructor's style. He decides he'll go to two more classes to see if it improves, and if not, he'll switch to a different course. Keegan is showing adaptability by developing a(n) __________ plan. A. learning C. corrective B. objective D. contingency

29. D Contingency. A contingency plan is an alternate course of action. Keegan is being adaptable because he's willing to consider doing something in a different way. Objective, corrective, and learning are not terms that are commonly used to describe a plan for an alternate course of action.

3. A public corporation's board of directors has the fiduciary responsibility to ensure that the company makes decisions that protect the financial interests of A. government entities. C. the community at large. B. board members. D. all shareholders.

3. D All shareholders. Fiduciary responsibility involves acting in the best interest of a client or benefactor and making wise financial decisions on his/her behalf. A corporation's board of directors consists of individuals who are appointed or elected to make decisions on behalf of the shareholders—the company's owners. Board members, local community members, and government officials may or may not be shareholders.

30. When showing why change is necessary, change leaders should A. provide evidence. C. create charts and graphs. B. speak only to coworkers. D. avoid giving too many details.

30. A Provide evidence. When showing why change is necessary, change leaders should provide evidence if possible. This strengthens the case for making the change. Showing evidence may include creating charts and graphs, but this is not necessary. The more details given, the better. It is important to speak to the business's owner or managers during this stage, not just coworkers.

31. When setting your financial goals, you should choose goals that are A. unrealistic and general. C. unrealistic and specific. B. realistic and general. D. realistic and specific.

31. D Realistic and specific. When setting goals, it's important to be as specific as possible. You should determine an amount, a purpose, and a timeframe for the money you plan to save. It's also important to be realistic. You don't want to get discouraged by setting a goal you have no chance of reaching.

32. Saving money helps you achieve __________ goals, while investing money helps you achieve __________ goals. A. long-term; career C. career; short-term B. long-term; short-term D. short-term; long-term

32. D Short-term; long-term. Saving money involves putting away a portion of your income to use in the future. This may involve placing money in a savings account where you can easily withdraw the funds when you need them. Saving money can help you achieve your short-term goals such as buying a new computer or taking a trip. Often, people use their savings to make investments. Investing money involves using money to make money. By investing your money, you can make more money than you can with just income and savings. The money you make from your investments can help you achieve your long-term goals such as funding your children's college education, starting your own business, or using it for living expenses when you retire. Your career goals involve your vocation, occupation, or profession and do not always involve saving or investing money.

33. Which of the following is a true statement about saving and investing: A. The need to save and invest is unrelated to the impact of inflation. B. A key factor to long-term financial well-being is to start saving and investing early on. C. Your spending habits have a minimal impact on the amount of money that you save. D. You typically earn more interest on savings accounts than long-term investments.

33. B A key factor to long-term financial well-being is to start saving and investing early on. Getting started early is the key to successful investing. The sooner you begin to take advantage of the compounding growth of the stock market, the more money you will have long-term. Inflation is an increase in the cost of goods and services. Over the years, the value of money declines. If you begin to save and invest when you are young, your interest compounds more, making the overall impact of inflation less dramatic. If you have extravagant spending habits, you will not have as much money to save and invest. Investments tend to yield higher returns than interest earned on a savings account.

34. Althea just received her first paycheck at work. She's excited, but as she looks at her pay stub she gets confused. She wants to know how much money she made in this pay period, but there are so many different numbers. If Althea wants to know how much money will actually be deposited in her bank account, she should look at the A. state tax. C. federal income tax. B. gross pay. D. net pay.

34. D Net pay. The net pay is the amount of money Althea will actually receive after all her withholdings have been taken out. This is the money that will be deposited in her bank account. The gross pay is the amount she earns before her withholdings are taken out. Federal income tax and state tax are money that Althea owes to the government.

35. Finance companies raise capital by A. developing stock exchanges. C. issuing notes and bonds. B. managing pension funds. D. pooling investors' funds.

35. C Issuing notes and bonds. Finance (credit) companies raise capital by issuing notes and bonds, which they use to provide loans to businesses and consumers. Investment institutions consider the investors' goals and needs when they pool and invest funds. Some investment institutions manage pension funds. Finance companies do not develop stock exchanges; rather, they buy and sell securities via formal stock exchanges such as the New York Stock Exchange.

36. Which of the following is an example of a deposit-taking institution: A. Premier Insurance Company C. Insight Credit Services B. First Street Credit Union D. Delaware Mortgage Company

36. B First Street Credit Union. Credit unions are cooperatives that provide financial products and services to a group of individuals who share a common characteristic such as working for the same employer or working in the same industry. Credit unions offer many different types financial products including savings and checking accounts for their members. Insurance companies, credit-services companies (e.g., MasterCard), and mortgage companies do not provide deposit-taking financial products.

37. What type of financial market structure involves trading unlisted stock via a dealer network? A. Auction C. Debt B. Over-the-counter D. Under-the-table

37. B Over-the-counter. An over-the-counter market involves trading securities outside of a formal (auction) exchange. Over-the-counter securities are negotiated trades that occur via a dealer network. Stocks traded over-the-counter typically involve smaller companies that do not meet the requirements to participate in auction exchanges. On an auction market such as the New York Stock Exchange, multiple traders place bids on behalf of investors. Simultaneously, buyers and sellers submit offers to buy and sell their stocks at certain prices. The stock's trade price is the highest price that a buyer is willing to pay and the lowest price at which the seller is willing to sell. Debt markets buy and sell debt instruments such as bonds and mortgages. Under-the-table is a fictitious term.

38. Which of the following are examples of agricultural products that are traded on commodity market exchanges: A. Wheat, livestock, and corn C. Corn, hogs, and bread B. Sheep, cereal, and wheat D. Cattle, cereal, and grain

38. A Wheat, livestock, and corn. Commodities are raw, primary products, which are typically categorized as energy, metals, and agricultural products. Agricultural products such as livestock (e.g., sheep, hogs, and cattle) and grains (e.g., wheat and corn) are agricultural products that are traded on commodity market exchanges. Grains are used to make cereal and bread; therefore, these items are not traded on commodity market exchanges.

39. Which of the following is an example of convergence in the finance industry: A. United Federal Bank merges with Provincial Insurance Company. B. Constitution Savings and Loan merges with Adams Community Bank. C. Independence Insurance Company acquires NetAutoInsurance.com. D. Chase Schwartz Financial Consultants acquires Dollar-Wise Financial Services.

39. A United Federal Bank merges with Provincial Insurance Company. Convergence is the merging of financial providers from different financial sectors. An example of convergence is a retail bank (e.g., United Federal Bank) merging with an insurance company (Provincial Insurance Company) to form a single entity. Consolidation is the merging of financial providers within the same institutional category. For example, consolidation occurs when two banks merge to form one bank; two insurance companies merge to form one insurance company; or two financial consulting companies merge to form one financial consulting company.

4. Which of the following is a tax-deductible expense: A. A computer for a home-based business C. Athletic-club membership fees B. Personal telephone charges D. International leisure travel

4. A A computer for a home-based business. Many business expenses—equipment, supplies, and travel—are tax deductible under specific conditions. Often, individuals pay for business-related goods and services upfront and list them as deductions on their tax returns, which can lower their tax obligation. A computer used for a home-based business is an example of an item that can be claimed as a tax deduction on a tax return. Goods and services for personal consumption—personal telephone charges, athletic-club membership fees, and international leisure travel—are not tax-deductible expenses.

40. One advantage of consolidation to financial firms is A. one-stop shopping. C. fewer technology problems. B. lower costs. D. less liquid capital.

40. B Lower costs. Consolidation is the merging of financial providers within the same institutional category. For example, consolidation occurs when two banks merge to form one bank. By consolidating, the financial firms can achieve economies of scale, which reduces redundancy and lowers costs. Another advantage of consolidation to firms is that it provides more liquid capital for all companies involved. Onestop shopping is an advantage to consumers. Consolidation does not always lead to fewer technology problems.

41. What tends to happen to financial markets when the unemployment rate increases? A. Investment in commodities increases. C. Investment in collectibles increases. B. Investors sell their bonds. D. Investors sell their stocks.

41. D Investors sell their stocks. When individuals are not working, they do not have the money to invest in the stock market. Also, they are more likely to sell or liquidate their stock or other investments (e.g., collectibles) if they need the money for living expenses. During a period of economic contraction, employed people often fear job loss, which prompts them to save money rather than invest it. Investors tend to buy bonds during an economic contraction when unemployment rises because these are often cheaper investment options. Unemployment and the fear of job loss can cause trading to decrease on all financial markets, including commodities.

42. One factor that has stimulated financial globalization is A. higher tariffs on imported goods and services. B. a movement from floating exchange rates to fixed exchange rates. C. government deregulation. D. a decrease in domestic competition.

42. C Government deregulation. Globalization is the rapid and unimpeded flow of capital, labor, and ideas across national borders. Liberalization and deregulation have enabled capital to flow more freely across national borders, making it easier to invest in foreign markets. Other factors that have impacted financial globalization include the reduction of tariffs and taxes on international financial transactions; the movement toward floating exchange rates from fixed exchange rates; and increased competition among domestic financial institutions.

43. An increase in free-flowing capital is a benefit of A. global protectionism. C. financial globalization. B. investor innovation. D. economic conservatism.

43. C Financial globalization. Globalization is the rapid and unimpeded flow of capital, labor, and ideas across national borders. Free-flowing capital on an international level has led to the integration of financial markets, offering equal access to market participants, regardless of their home countries. Liberalization and financial product innovation (rather than investor innovation) are factors that have fueled the movement to financial globalization. Protectionism refers to government policies that aim to protect domestic industries and businesses against foreign competition. Protectionism hinders the free flow of capital across national borders.

44. Kyle wants to purchase stock in a public corporation. Where can he quickly find current financial information about the corporation's performance? A. The corporation's product catalog C. A local newspaper B. An employee handbook D. The corporation's website

44. D The corporation's website. Public corporations are legally required to release their financial statements. Shareholders and potential investors evaluate the financial statements so they can make informed investing decisions. The financial statements are included in the company's annual report. One way that public corporations make their annual reports available for review is by posting them on their company websites. An employee handbook, a local newspaper, and a product catalog are unlikely to contain current financial information about a public corporation.

45. Jessica wants to evaluate the rate of return for a particular stock. What component of the stock table should she review? A. Net change C. Ticker B. Volume D. Yield percentage

45. D Yield percentage. In a stock table, the yield percentage is located in the YLD column. The yield percentage refers to the rate of return on the security and is determined by dividing the dividend by the actual closing price. When evaluating the yield percentage, it is important to keep in mind that a stock with a high dividend yield is typically less volatile than one with a low yield. Investors often compare the yield percentages of similar companies with different stock prices to make investing decisions. The volume (VOL) column in a stock table indicates how many shares were traded that day. The net-change (NET CHG) column in the table indicates the difference between a stock's closing price and the previous day's price, which may increase or decrease. The ticker or ticker symbol (STOCK [SYM]) column consists of a system of letters that uniquely identifies a company and is often based on the company name.

46. What can a potential investor determine about a stock by analyzing its price range in a 52-week period? A. Dividend amount C. Previous close B. Rate of return D. Stock volatility

46. D Stock volatility. Investors can assess stock volatility by analyzing the 52-Week HI/LO column in the stock table. This column indicates the highest and lowest prices paid during the past year. If the range between the lowest and highest prices is large, then the stock's price has risen or fallen sharply in the past year, making it a volatile, riskier stock. The rate of return or yield is determined by dividing the dividend by the actual closing price and is expressed as a percentage. The dividend is the dollar amount the investors earn on a share of stock. Previous close indicates the stock's closing price for the previous day.

47. A business's sales may be strong, but that doesn't mean it's making as much money as it would like to. In this situation, managers may analyze financial information to determine how to A. enter into contracts. C. boost profitability. B. create a budget. D. make purchases

47. C Boost profitability. When a business is not making as much money as it would like to, its managers look for ways to boost profitability. They do so by analyzing financial information. In this situation, managers would not be creating a budget, entering into a contract, or making purchases.

48. Alisha is creating her company's income statement, but she's unsure how she should classify employee salaries, advertising, and utilities. In which of the following income statement categories do these costs fall: A. Revenue C. Gross profit B. Cost of goods sold/Cost of sales D. Operating expenses

48. D Operating expenses. Operating expenses are the expenses incurred from keeping a business's doors open. This includes employee salaries, advertising, and utilities. The business pays these expenses so it can operate. Cost of goods sold/Cost of sales is a category that includes all direct costs to obtain and/or produce the goods or services that a business sells. Gross profit is determined by subtracting the cost of goods sold from revenue. It is the total profit made before all other remaining expenses have been deducted. Revenue is the total amount of money earned by a business. It includes the sales of the business's goods and service, interest earned from bank accounts, returns on investments, and the sale of the business's assets. All of the money coming into the business, no matter what the source, is revenue.

49. Which of the following is true of working capital management: A. It deals with accounts payable and receivable. B. It concerns long-term decisions. C. It decides how investments will be financed. D. It determines which projects the business will invest in.

49. A It deals with accounts payable and receivable. Working capital management focuses on a company's current balance of assets and liabilities. It involves the management of accounts payable and receivable, inventory, and cash. Capital investment decisions are made for the long term. Capital investment decisions also decide how investments will be financed and determine which projects a business should invest in.

5. A financial audit is an example of a __________ control. A. subjective C. conditional B. preventative D. detective

5. D Detective. Internal controls are actions that minimize risk while maximizing efficiency. A financial audit involves objectively reviewing financial information to verify accuracy. Conducting a financial audit helps a business detect existing errors. If the audit detects errors, the business can take steps to correct them to achieve compliance with government regulations. Preventative controls involve actions to keep something from happening before it occurs. Conditional controls allow certain actions to occur within a specific set of circumstances. Subjective attitudes and behaviors are influenced by personal feelings or opinions.

50. Shawn wants to know if his company is staying on budget, so he looks at the difference between the budgeted amount and the amount the company actually spent. Shawn is analyzing a(n) A. variance. C. asset. B. expense. D. sales forecast.

50. A Variance. A variance is the difference between a budgeted amount and an actual amount. Budget variances let businesses know where they are on target and where they are not. An expense is the money that the business spends. An asset is something of value that a business owns. A sales forecast is a prediction of future sales over a specific period of time.

51. To determine if a business is using its resources in the most effective ways, a business relies on accurate A. financial information. C. production schedules. B. market demographics. D. security networks.

51. A Financial information. Businesses use financial data to develop reports that help them monitor their financial situations, make decisions, and meet compliance requirements. Because a business's resources cost money, an important aspect of monitoring the business's financial situation involves analyzing its resources—supplies, equipment, employees, etc. For example, if information reveals that the business is using old equipment that is lowering productivity, the equipment is a liability rather than an asset to the business. Therefore, the business might consider purchasing a new piece of equipment to improve its productivity and, eventually, its profitability. Market demographics, production schedules, and security networks do not help a business determine if it is using its resources in the most effective ways.

52. A well-designed financial-information management system should provide a business with A. ongoing support from external financial institutions. B. a complete audit trail of financial transactions. C. insight about changes in the marketplace. D. a variety of unrelated data.

52. B A complete audit trail of financial transactions. A financial-information management system gathers, maintains, and stores all of the business's financial data. A well-designed system provides managers with a complete audit trail of each financial transaction. This enables managers to track each step of the accounting process in sequential order, which helps the business identify errors or inconsistencies that might affect its compliance. A well-designed financial-information management system does not need to provide a business with ongoing support from external financial institutions or a variety of unrelated data. Marketing-information management systems provide businesses with insight about changes in the marketplace.

53. Banks limit their employees' and vendors' access to confidential financial information to A. protect their customers' privacy. B. maintain a safe working environment. C. safeguard cash drawers. D. ensure that collection procedures are followed.

53. A Protect their customers' privacy. Businesses have an ethical responsibility to maintain the privacy of their customers' financial information. Businesses must take precautions to ensure that customers' credit information, bank accounts, and other types of financial data are kept confidential. To maintain confidentiality, businesses must develop and implement security policies. These policies may restrict the employees' access to customers' financial information. Maintaining a safe work environment involves physical safety. Safeguarding cash drawers is a security issue rather than privacy issue regarding information. Collection procedures are the steps that employees take to collect money from others.

54. What is a benefit to businesses of using a central data repository for financial information? A. Reliance on historical data C. Focus on low volumes of data B. Quick response to complex queries D. Reliance on a single software application

54. B Quick response to complex queries. A central data repository is a centralized database that businesses use to maintain, update, and store large amounts of financial data throughout their organizations. The benefits to businesses of using a central data repository include quick response to complex queries, accessibility to consistent data, economies of scale, and accessibility by several different software applications. A central data repository contains both current and historical data.

55. To reduce fraud and counterfeiting risks, credit-card issuers are moving to a system that places encrypted chips into customers' credits cards, which require the cardholders (customers) to A. present the seller with photo identification for verification. B. sign receipts to authorize the use of their credit cards. C. provide personal identification numbers to process transactions. D. change the magnetic strips on their credit cards.

55. C Provide personal identification numbers to process transactions. Many credit-card service providers currently print security codes (e.g., CVV number) on the back of their customers' credit cards as an additional security measure to prevent credit-card fraud. However, these security codes are not foolproof, especially in situations such as in-store point-of-sale transactions in which cashiers do not verify the cardholder's identification by asking for a photo ID (e.g., driver's license). Credit-card issuers are moving toward technology in which an encrypted chip is placed in the credit card. This chip contains a PIN that the card user must enter into the POP keypad or computer system (for online purchases) before the transaction can be processed or completed. Because the credit cardholder and the credit-card issuer are the only entities that know the PIN, fraud or counterfeiting activities are more difficult to carry out. Cardholders sign receipts at the end of a sales transaction. It is unrealistic and to require customers (credit cardholders) to change the magnetic strip on their credit cards.

56. By using data-mining techniques to sort through customers' financial transactions, businesses can identify trends regarding A. accounting methods. C. current political issues. B. purchasing patterns. D. ongoing outsourcing needs.

56. B Purchasing patterns. Data mining is the process of searching computer databases to look for patterns and correlations among information. Businesses mine data about customers' purchasing patterns to help them make business decisions. For example, suppose data-mining activities reveal that a grocery-store chain experiences a surge in diaper and soft-drink purchases on Thursday evenings made by men between the ages of 24 and 40. This would suggest that men (dads) stop at the store to stock up on baby diapers for the weekend to avoid the weekend shopping rush. It would also suggest that these men are likely to be home watching sports (and/or babies) over the weekend, so they pick up their favorite beverages while they are in the store buying diapers. The grocery-store chain may use this information to charge full price for these items on Thursday nights and/or place a soft-drink display next to the babysupply section of the grocery store to maximize sales and increase revenues. Data mining customers' financial transactions will not identify trends regarding the business's accounting methods, its ongoing outsourcing issues, or external factors such as current political issues.

57. Which of the following is a data-mining technique that involves scanning computer documents, email messages, and web pages to obtain data for predictive analysis: A. Dashboard C. Accountability matrix B. Text mining D. Query meandering

57. B Text mining. Data mining is the process of searching computer databases to look for patterns and correlations among information. Businesses use the information they obtain from data mining to make business decisions, which may include planning promotions and developing products for new markets. Based on their specific needs, businesses can use different data-mining techniques. The text-mining technique involves looking for key words or ideas in multiple text formats such as computer (e.g., Word) documents, e-mail messages, and web pages. A dashboard is a data-mining tool that summarizes a business's financial data and presents it in easy-to-read charts and/or tables. Dashboard technology updates the data in real time and enables the business to assess its financial performance. An accountability matrix is a project-management tool. Query meandering is a fictitious term.

58. A computer software application that consolidates and manages multiple departmental budgets is beneficial to large businesses that A. use a bottom-up approach to budgeting. B. rely on an external source to facilitate forecasting. C. focus on customer expectations to develop their budgets. D. generate inventory reports on a regular basis.

58. A Use a bottom-up approach to budgeting. Budgeting is the process of estimating income and expenses. The bottom-up budgeting approach involves gathering income and expense forecasts from individual departments, divisions, or functions and integrating them into one budget for the entire company. Because manually merging and updating individual budgeting documents or spreadsheets can be very time consuming, some budgeting software contain applications to automate the budget-consolidation process. The budgeting process is an internal activity that considers external factors (e.g., customer/client buying behavior) during the development process. Businesses of all sizes generate inventory reports.

59. What computer application enables a business to access information from its enterprise resource planning (ERP) software program for use in its budgeting softw60. By comparing reports for three consecutive months, Prater Manufacturing has determined that 15% of the company's accounts are 60 days overdue. This financial analysis will provide the company with information about A. cash outflows. C. sales volume. B. aging accounts. D. cost of sales.are program? A. Cross-reference C. Group B. Automated data transfer D. Data-validation

59. B Automated data transfer. Businesses typically use different software programs to accommodate their various needs. To quickly and efficiently obtain the financial information stored in other programs, some budgeting software programs have applications that automatically transfer data from other programs (e.g., ERP and CRM) to facilitate budget development and report generation. The cross-reference function in a spreadsheet program enables computer users to locate related data or information in other worksheets, spreadsheets, etc. The group function in a spreadsheet program enables computer users to group different cells of data. In spreadsheet applications, the data validation function ensures that computer users input correct values into specific spreadsheet cells.

6. After repeated warnings to fix problems, the government forced OBT Corporation to close its doors until it complied with certain financial regulations. In this situation, the consequences of noncompliance involved A. consumer confidence. C. bankruptcy. B. business disruption. D. transparency.

6. B Business disruption. If warnings and fines do not prompt a business to comply with the laws, the government may take steps to shut down operations until compliance is achieved. This disrupts normal business operations because employees cannot perform their jobs, sell products, and earn revenues. Non-compliance may lower consumer confidence in the business. Persistent non-compliance may force the business to shut down for good and declare bankruptcy. Transparency involves providing honest and accurate financial information via clear communication.

60. By comparing reports for three consecutive months, Prater Manufacturing has determined that 15% of the company's accounts are 60 days overdue. This financial analysis will provide the company with information about A. cash outflows. C. sales volume. B. aging accounts. D. cost of sales.

60. B Aging accounts. Businesses use computer software applications to calculate and summarize different types of financial data for analysis. A business uses the accounts-receivable application to determine the amount of money coming into the business and from whom, which helps it isolate delinquent or aging accounts. If Prater Manufacturing compares reports from previous months and detects an increase in overdue accounts, it might want to take steps to improve collections processes so it can obtain payments from customers in a more timely manner. Businesses use accounts-payable applications to analyze cash outflows. Income, customer relationship management, and inventory management applications can provide information about sales volume and cost of sales.

61. To determine the bills that are due in the next 10 days and the dollar amount of each bill, a company needs to use a financial analysis application to evaluate its A. dividend payments. C. sales revenue. B. accounts payable. D. credit rating.

61. B Accounts payable. Accounts payable are the monies owed by the business to others. Accounts-payable applications help businesses organize bills and allocate funds to pay bills when they are due. Budgeting tools and sales applications can help a business analyze its sales revenue. Dividends are payments made to stockholders for their investments. A credit rating is the score assigned to a borrower based on previous loans.

62. Jacob wants to view all of the company's records for customers who are located in a specific zip code. When he accesses the company's customer database to obtain the information quickly, he should use the __________ application. A. merge C. find B. filter D. format

62. B Filter. A filter involves grouping data based on certain criteria. Because Jacob's company may have thousands of customers, and he only wants to view a small portion of those customers, he can use the filter application to set the criteria for fields that he wants to view, such as zip code. The merge application brings together data from other areas or applications. The find application enables computer users to look for information by scanning for specific key words. Formatting involves establishing guidelines for the layout of a document, table, etc. This typically involves setting margins, font type and size for headlines and text, etc.

63. What process involves organizing the fields and tables in a database to reduce redundancy? A. File preservation C. File unification B. Data supplementation D. Data normalization

63. D Data normalization. Data normalization is the process of organizing the contents of a database. It involves creating fields and tables for the data that the company and/or user needs. Because the organizing process requires careful planning, it excludes unnecessary data that may cause redundancy. The process of organizing fields and tables in a database is not data supplementation, file unification, or file preservation.

64. Which of the following are external users of a business's financial information: A. Investors, managers, and lenders C. Lenders, managers, and employees B. Banks, vendors, and investors D. Vendors, employees, and banks

64. B Banks, vendors, and investors. External audiences such as banks, vendors, and investors use a business's financial statements to make lending, selling, and investing decisions. Therefore, it is important to provide external audiences with accurate financial information. The government requires businesses to follow specific guidelines when preparing their financial statements to ensure consistency, transparency, and clarity. Managers and employees are internal users of a business's financial information.

65. A business that accurately reports its financial position consistently is more likely to A. improve its productivity. C. be highly innovative. B. earn investors' trust. D. solve problems quickly

65. B Earn investors' trust. Because shareholders and potential investors analyze businesses' financial statements to make investing decisions, businesses are legally obligated to provide accurate financial information. When a business complies with the law and provides accurate financial information, it is showing its investors that it is honest. And, honest businesses are more likely to gain investors' trust. Productivity levels, innovation, and problem-solving skills do not affect a business's need and ability to report its financial position.

66. Which of the following is an activity carried out by the finance function of business: A. Transaction documentation C. Data collection B. Business valuation D. Report generation

66. B Business valuation. Finance is the business function that involves all money and money management matters. Business valuation involves determining the value of a business by evaluating the business's assets and liabilities and economic factors. Determining the dollar value of a business involves money, so this activity is a performed by the finance function of business. The accounting function collects, documents, and maintains financial records and prepares financial reports for the finance function of business.

67. The accounting function of business __________ so that the finance function of business can __________. A. sets profitability goals; distribute the business's assets B. determines funding methods; conduct strategic planning C. develops monetary policies; maximize use of retained earnings D. prepares financial reports; make informed investment decisions

67. D Prepares financial reports; make informed investment decisions. Accounting is the process of keeping and preparing financial records. An important aspect of accounting is preparing financial reports. The finance function uses the financial reports to make money-management decisions, including how to use or invest its retained earnings. The finance function also uses the financial reports to develop long-term (strategic) plans that will support the business's financial well-being. The finance function does not distribute the business's assets. The accounting function of business does not determine funding methods, develop monetary policies, or set profitability goals.

68. A disadvantage of the accrual accounting system is that it does not A. provide insight to a business's overall well-being. B. always reflect a business's current cash reserves. C. allow a business to claim expenses as tax deductions. D. allow a business to record transactions as they occur.

68. B Always reflect a business's current cash reserves. The accrual accounting system records transactions at the time they occur even if no money changes hands at the time, such as purchases made with credit. Most businesses use the accrual accounting system because it more accurately reflects the business's overall financial position and well-being. A disadvantage of the accrual accounting method is that the numbers do not always reflect the business's cash reserves. This is because the business has not received payment for sales that its customers purchased on credit. Regardless of the accounting system used, the government allows businesses to claim certain expenses as tax deductions. The cash accounting method records income and expenditures at the time the money changes hands.

69. Financial accounting practices focus on __________, while managerial accounting practices focus on __________. A. the use of informal reporting formats; the use of specific reporting formats B. individual departments and functions; the company as a whole C. past activities; present and future activities D. information for internal audiences; information for external audiences

69. C Past activities; present and future activities. Financial accounting focuses on preparing and providing financial reports to external audiences such as investors, vendors, banks, government agencies, etc. These types of reports provide financial information about the company's overall past performance for a specific period of time, which helps external audiences, such as investors and banks, make investing and lending decisions. Because government agencies review financial reports, businesses are required to follow certain guidelines to present the information. On the other hand, businesses use managerial accounting to look at many types of relevant financial information (past, current, future) that affect business activities. Internal audiences (e.g., executive-level managers) use managerial reporting systems for organizational planning and strategic decision making. Because the reports are for internal use, the accounting staff has more flexibility in the way they format the reports.

7. What type of technology focuses on automating information security, preventing employee fraud, and auditing transactions for compliance? A. Enterprise resource planning software (ERP) B. Governance, risk, and compliance systems (GRC) C. Geographic information system (GIS) D. Transport control protocol (TCP)

7. B Governance, risk, and compliance systems (GRC). GRC technology involves a variety of complex applications to reduce risk and ensure compliance. The primary purposes of GRC are to automate and secure information, monitor systems to ensure that employees adhere to rules and procedures, and continuously audit transactions to ensure compliance. ERP software applications focus on the business's daily operations, including product planning, manufacturing, inventory management, sales, etc. GISs are decision support systems that analyze spatial information. TCP transmits information over the Internet.

70. What financial ratio does a business use to identify trends about its ability to meet its short-term debt obligations? A. Gross margin C. Return on assets B. Liquidity D. Net profit

70. B Liquidity. By comparing its liquidity ratios over time, a business may identify trends about its ability to convert its assets into cash. If the business's liquidity ratios increase over a period of several months, the business's financial position appears to be improving in terms of its ability to pay its short-term debt. This, in turn, reduces risks associated with bankruptcy. Gross margin, return on assets, and net profit ratios measure profitability.

71. To identify profitability trends, a business should compare its __________over a period of time. A. balance sheets C. current liabilities B. leverage ratios D. income statements

71. D Income statements. An income statement (profit-and-loss statement) is a financial summary that shows how much money the business has made or has lost over a period of time. By comparing income statements from consecutive time periods, a business can identify profitability trends. For example, if the income statements show a gradual increase in sales over a period of time, the business is earning more money from its sales income. This typically results in a gradual increase in profits. Businesses use balance sheets to measure their liquidity and leverage. Current liabilities are the debt the business must pay to creditors within twelve months.

72. Before extending credit, businesses should analyze their customers' A. stock purchases. C. capital gains. B. debt ratios. D. technical assets.

72. B Debt ratios. Offering credit involves allowing the buyer to purchase now and pay later. Offering credit is a risk to businesses because customers may fall behind in making and/or default on their payments. Therefore, businesses collect and analyze a variety of financial information about their customers before extending credit. The debt ratio is a tool that calculates a customer's assets in relation to the customer's level of debt as a percentage. If a customer's debt is low in relation to his/her assets (primarily income), the customer is more likely to have money to make payments, making him/her a good candidate for credit. Stock purchases, capital gains, and technical assets are not factors that typically influence a business's decision to extend credit to a customer.

73. While analyzing a financial report, Jennifer saw that the company paid 25% more in overtime wages last quarter than it had budgeted. In this situation, Jennifer detected a(n) A. variance. C. transaction shortage. B. adjustment. D. accounting error.

73. A Variance. A variance is the difference between an expectation and an occurrence. By comparing and contrasting two or more sets of financial data, a businessperson can determine if there are differences and patterns among the data. In the situation described, the company paid more in overtime than it had originally estimated, so Jennifer detected a variance. Jennifer did not detect an adjustment, transaction shortage, or accounting error.

74. What is the first step in the staffing process? A. Interviewing C. Determining need B. Hiring D. Recruiting

74. C Determining need. Before an HR manager does anything else, s/he should determine need. S/He must figure out where the company is lacking human resources and determine if the positions are permanent, temporary, full-time, or part-time. Recruiting, interviewing, and hiring all come after determining need.

75. The first social group a consumer belongs to is her/his A. circle of friends. C. kindergarten class. B. family. D. neighborhood.

75. B Family. The first social group a consumer belongs to is her/his family. The family has a strong influence on consumer behavior and serves as a filter for other important influences such as culture. Friends, classmates, and neighborhood circles are also social groups that affect buying behavior, but the family is the very first group a person belongs to.

76. What is one downside of using online storage for your business records? A. Online storage is too expensive for most business owners. B. Files are difficult to access when you use online storage. C. Online storage is not as safe as keeping hard copies of documents at your office. D. Online storage companies may have problems or go out of business.

76. D Online storage companies may have problems or go out of business. Although online storage is usually safe, there is always the chance that the company you're relying on may have problems or go out of business. Files are not difficult to access when you use online storage—they are usually very easy to access. Online storage has pros and cons, but it is not more dangerous than keeping physical copies at your office. In fact, online storage can save your files if there is a fire or vandalism at your office. Online storage is typically affordable.

77. Dara is using Google to locate information on the Internet about her research report topic. She is using a search A. group. C. technology. B. machine. D. engine.

77. D Engine. Search engines (such as Google, Yahoo, or Bing) find web pages that correspond to the phrases, key words, or topics you enter. If Dara searches for her research report topic, she will receive results that correspond to that topic. Search engines are not referred to as machines, technologies, or groups.

78. Records that help businesses keep track of their furniture, equipment, land, and buildings are __________ records. A. promotional C. personnel B. payroll D. asset

78. D Asset. Asset records are documents about something of value that a business owns. Payroll records are documents that contain information about an employee's pay and deductions, as well as details about his/her identification, hours worked, regular wages, and overtime wages. Personnel records are documents that keep track of employee information regarding hiring, evaluations, promotions, reprimands, and terminations. Promotional records are documents containing information about the various types of communications that businesses use to inform, persuade, or remind customers of their products, images, or ideas.

79. Von is a very thorough record keeper. He always carefully files his company's bills, receipts, and cancelled checks because he knows that the company has a responsibility to prove the expenses it lists on its tax return. Von's company bears a A. record burden. C. burden of proof. B. responsibility to prove. D. tax return proof.

79. C Burden of proof. It's important to keep good records because you are responsible for proving the expenses you deduct on your tax return. This includes things like bills, receipts, and cancelled checks. Von carefully files these items so that they can be easily found.

8. Because compliance technology helps large businesses keep up-to-date with regulatory changes, their A. efficiency levels tend to increase. B. vulnerability levels tend to increase. C. need to understand the changes tends to decrease. D. need to develop audit guidelines tends to decrease.

8. A Efficiency levels tend to increase. Because regulations frequently change, businesses would have a difficult time keeping up with changes manually. Compliance technology helps a business keep up with regulatory changes in real time, which increases its efficiency because fewer people are needed to oversee and carry out compliance efforts. It also lowers a business's vulnerability because the compliance technology continuously monitors business activities and financial transactions and alerts the business about compliance issues when they occur. Businesses should develop audit guidelines, and employees should understand the importance of compliance, no matter how the business complies with regulations.

80. Who is responsible for making sure that a business is a healthy, hazard-free place to work that complies with government regulations? A. Employees C. The government B. The employer D. Local law enforcement

80. B The employer. It is an employer's responsibility, not the local law enforcement's duty, to be sure his/her company is a safe and healthy place to work. Employees also have a responsibility to make sure they are behaving in ways that are safe and healthy. Employers must comply with all governmental health and safety regulations.

81. One of Boris's coworkers at a deli cuts himself on the meat slicer. What should Boris do to help his coworker? A. Allow his emotions to take over. C. Attempt to treat the wound. B. Stay as calm as possible. D. Evacuate the room.

81. B Stay as calm as possible. When facing an emergency situation, it's critical to remain as calm as possible. Allowing emotions to take over can lead to hasty actions that actually harm the situation, not help it. Boris should not attempt to treat the wound himself. Instead, he should call for emergency assistance and allow someone with medical training to clean the wound. There is no need to evacuate the room in the case of an injury. SOURCE: OP:01

82. Creating a change-management plan includes determining A. who is authorized to amend the project plan. C. with whom to share the project plan. B. deadlines for each deliverable. D. a realistic budget.

82. A Who is authorized to amend the project plan. Creating a change-management plan includes determining who is authorized to amend, or change, the project plan. Determining deadlines for each deliverable is part of project scheduling. Determining with whom to share the project plan is not a part of change management. Determining a realistic budget comes at a different point in the project-planning process.

83. Which of the following is true of maintaining an inventory of supplies: A. Conducting an inventory of supplies increases the chance of theft. B. All employees should order supplies when they need them. C. Supplies only need to be ordered once per year. D. Using proper, approved inventory processes helps to ensure that you won't run out of supplies.

83. D Using proper, approved inventory processes helps to ensure that you won't run out of supplies. One of the biggest reasons to inventory your supplies is that it lets you know what you have in stock. When you see that you're running low, you can reorder supplies. Supplies need to be maintained; they aren't ordered only once per year. Conducting a routine inventory of supplies actually reduces the chance of theft. All employees should not order supplies; instead, one or two employees should be in charge of purchasing. If too many employees buy supplies, it can be hard to keep track of inventory.

84. Which of the following is an example of an intangible output: A. Shampoo C. A computer B. A pizza D. Education

84. D Education. Intangible outputs are not capable of being detected through the senses. Education is intangible because it cannot be touched, smelled, tasted, seen, or heard. Pizza, computers, and shampoo are all tangible goods because they are able to be detected through the senses.

85. Sandra wants to make a good impression on her coworkers, so she always showers, brushes and flosses her teeth, and keeps her fingernails clean. Sandra focuses on her A. self-concept. C. hygiene. B. body language. D. relaxation

85. C Hygiene. Sandra knows that developing good, consistent hygiene habits can enhance her personal brand. Good hygiene helps make a good impression on the people around you. Body language consists of nonverbal cues such as gestures, facial expressions, posture, or any other form of communicating without words. Self-concept is how you see yourself. Relaxation is important, but it's not shown in Sandra's example.

86. A computer company creates a new kind of software. Which type of innovation is this? A. Product C. Positioning B. Process D. Paradigm

86. A Product. Product innovation occurs when a business either creates or improves a product. When a computer company creates a new kind of software, this is considered product innovation. Process innovation focuses on how something is done. Positioning innovation occurs when the purpose of a product is changed. Paradigm innovation occurs when there is a significant change in thinking.

87. Which of the following statements is true of time management: A. It requires a significant amount of extra work. B. It is a matter of common sense and just involves using a calendar. C. It refers to how people use the 24 hours in their day. D. It makes it more difficult for you to plan for the future.

87. C It refers to how people use the 24 hours in their day. Time itself is not under our control, but our actions are. And, if we learn to act in a way that makes the most of our time, then we are using the resource wisely. Learning time-management skills does not require a lot of extra work. Spending just a few minutes a day on time management can save you many hours on the job. Learning time-management skills is not just a matter of common sense. It takes more than just writing down appointments and project deadlines in your calendar. Time management can help you plan for the future and take major steps toward achieving your goals and becoming the person you want to be.

88. Which of the following is a potential job position within banking services: A. Public relations specialist C. Insurance broker B. Credit analyst D. Real estate developer

88. B Credit analyst. Banking services include cash management, short-term investments, mortgages and other loans, credit cards, and bill payment. A credit analyst works in the banking-services sector. A public relations specialist works in marketing. An insurance broker works in the insurance sector of finance. A real estate broker works in securities and investments.

89. Alana's primary responsibilities as an employee of the Independence Insurance Company are analyzing statistics to assess risks and designing insurance policies to minimize the costs associated with those risks. Alana works as a(n) A. controller. C. insurance agent. B. credit analyst. D. actuary.

89. D Actuary. Actuaries work in the insurance industry and are responsible for assessing risks by using statistical analysis. They also help design insurance policies to minimize the costs of the risks. Controllers direct the preparation of financial reports such as balance sheets and income statements and are often in charge of the accounting and auditing functions for an entire company. Credit analysts research and confirm loan applicants' employment, income, and credit histories to ensure that the bank has the correct information. Additionally, they prepare reports to submit to the loan committee and help the committee during the loan approval process. Insurance agents sell insurance policies to individuals and businesses.

9. One of your coworkers is having trouble giving verbal directions to her team members, so she asks you for advice. Which of the following pieces of advice should you give her: A. Your instructions will be clearer and more effective if you improvise. B. Speak as quickly as possible to communicate your message. C. Ask the listeners if they have any questions. D. Assume that listeners understand you.

9. C Ask the listeners if they have any questions. It's important to make sure the listener understands your directions. You shouldn't assume they understand—instead, you should ask if they have any questions. It's also important to slow down when giving directions. If you speak too quickly, you'll be difficult to understand and listeners will have a hard time following along. It's better to rehearse what you'll say, not improvise your instructions.

90. The primary responsibility of a real-estate appraiser is A. determining the value of a specific property. C. selling residential property. B. processing commercial mortgages. D. granting approval for loans.

90. A Determining the value of a specific property. Often, real-estate appraisers specialize in valuing a specific category of property such as residential, commercial, or agricultural properties. They spend a great deal of their time conducting research and writing reports. Real-estate appraisers must obtain licensure to do their work, and licensing requirements vary by location and type of property. Loan officers and Certified Mortgage Bankers (CMBs) process mortgages, which are loans to purchase property. Credit analysts are responsible for verifying a loan applicant's financial standing and often help decide if loan approval should be granted. Real-estate agents sell property to individuals and businesses.

91. Which of the following is a true statement about obtaining a professional certification: A. The credentialing process may occur through a professional organization. B. A government board or agency must mandate and oversee the credentialing process. C. Certification requirements are standard throughout all jurisdictions. D. It is unnecessary to pursue continuing education after obtaining certification.

91. A The credentialing process may occur through a professional organization. Although certification and licensure indicate a person has acquired specific knowledge or skills in a certain area, the authorities that grant and oversee the credentialing processes for these designations differ. For example, a certified financial planner obtains certification from the CFP (Certified Financial Planner) Board, which is a nonprofit organization. When a government board or agency requires businesspeople to obtain certain credentials to work in their professions, they receive a license. In these situations, the government board or agency oversees the credentialing process. For example, certified public accountants (CPAs) are legally required to obtain a CPA license from the appropriate jurisdiction (e.g., state/provincial) to perform their work. Requirements to obtain licensure may vary by jurisdiction. Because the business world is a dynamic place, continuing education is often required to maintain certification or licensure.

92. To obtain her stockbroker license, Jackie needs to A. take and pass specific exams. B. submit her credentials to her employer. C. complete course work in logistics. D. pay professional development membership fees.

92. A Take and pass specific exams. Stockbrokers need to obtain a license to perform securities trades on behalf of their clients. Though requirements vary, most jurisdictions require stockbrokers to pass a set of specific exams. For example, stockbrokers must pass the Series 7 and Series 63 exams in the United States before they can obtain their licenses. If Jackie wants to obtain a job as stockbroker with a brokerage firm, she must prove that she has obtained her licensure. Course work in logistics is not a requirement to obtain a stockbroker's license. Stockbrokers or their employers typically pay for the courses and/or exams required to obtain a license to trade securities.

93. Ben is a vice president of State Street Savings and Loan. Which of the following is a group that is most likely to help Ben network with others within his profession: A. Local chamber of commerce C. College alumni group B. National Bankers Association D. Young Professionals Association

93. B National Bankers Association. When finance professionals actively participate in finance-related professional organizations, they can network and build relationships with others who work in their field. The local chamber of commerce, a college alumni group, and the Young Professionals Association have group members from fields other than finance.

94. Madelyn is responsible for selecting Elite Manufacturing Company's new payroll-processing vendor. Madelyn has narrowed down her selection to three vendors and is favoring Pay Day Enterprises, the small company where her brother works. The primary concern with Pay Day is that it has never handled payroll for company as large as Elite, which presents a business risk to the manufacturing company. This situation illustrates an ethical issue related to A. levels of service. C. a conflict of interest. B. financial reporting methodology. D. the company's structure.

94. C A conflict of interest. Because Madelyn's brother works for a potential vendor, Madelyn may not be able to be objective and neutral when making a final selection for her employer's new payroll-processing provider. When selecting a vendor, it is important to be objective and consider all of the advantages, disadvantages, and potential risks with each candidate. A vendor that has not worked with large companies may not have the resources readily available to provide adequate service. Because Madelyn has a conflict of interest in this situation, she may want to seek input from her managers or formally request that someone else make the final decision. The situation presented does not involve an ethical issue related to financial reporting methodology, levels of service, or the company's structure.

95. Newman Industries places a great deal of pressure on its employees to increase performance and meet goals and deadlines that are extremely difficult to attain. As a result, the nature of Newman's company culture increases its business risk because employees are more likely to behave unethically by A. embezzling funds. C. taking shortcuts. B. delegating work. D. focusing on profitability.

95. C Taking shortcuts. A company's work culture can dramatically affect the ways in which employees behave. Setting unrealistic goals and deadlines for employees often causes them to fear that their jobs are in jeopardy. In response, they may take shortcuts to get the work done, which can result in mistakes and defective products. Delivering inaccurate information and defective products to the market increases the business's risk of lawsuits and an unfavorable reputation. Not all employees have the authority to delegate their work. Delegating work and focusing on profitability are ethical behaviors. Embezzlement is an illegal activity that involves theft. Not all employees have access to company funds to engage in embezzlement.

96. Which of the following is a risk-management application that alerts the appropriate personnel when an unauthorized source has tried to access the business's computer network: A. Genetic algorithm C. Automated notification B. Organic scoreboard D. Forensic accounting

96. C Automated notification. By automatically notifying managers or other designated employees when an attempted breach occurs, the company can take swift action to increase its technological security. Forensic accounting involves the use of accounting skills and applications to investigate alleged illegal activity in relation to financial information. An organic scoreboard and genetic algorithm are not applications used to alert a company about an attempted computer breach.

97. When businesses in a particular industry carry risks that commercial insurance companies typically do not cover, they often form __________ to __________ risk. A. captive insurance companies; transfer B. insurance rating companies; avoid C. insurance brokerage firms; assume D. independent life insurance agencies; minimize

97. A Captive insurance companies; transfer. Organizations (i.e., corporations, industry/professional/trade associations) often form their own insurance companies, which are known as captive insurance companies. The founding organizations control their captive insurance companies' underwriting processes, premium rates, and claims-processing policies. This is an advantage to the founding companies because a primary reason they form their own insurance companies is they often carry risks that commercial insurance companies do not cover. For example, mining companies tend to carry more risk due to the dangerous nature of the mining process. When businesses purchase insurance, they are minimizing risks by transferring them to another entity; therefore, in these situations, businesses are not avoiding or assuming risks. Organizations do not form insurance rating companies, insurance brokerage firms, or independent life insurance agencies to transfer unusual types of risks.

98. The Kramer Pharmaceutical Company lists the possible side effects of its nighttime cold medicine on the bottle's label and exterior packaging. By disclosing this information, the company is reducing risks associated with A. product returns. C. product recalls. B. mechanical product defects. D. inadequate product warnings.

98. D Inadequate product warnings. Though specifications vary by product type, businesses must provide adequate information about their products. For example, pharmaceutical companies must advise consumers about a medication's dosage, ingredients, side effects, and possible negative interactions with food, other medications, alcohol, etc. Businesses that do not appropriately label their products increase their risks of lawsuits in relation to inadequate product warnings. Medications are not mechanical in nature. Product recalls occur when quality issues are detected after the products are released for sale. When this occurs, businesses take steps to retrieve those goods to reduce the consumers' exposure to safety risks. A product return is the process by which buyers return defective or unwanted good to the seller.

99. Which of the following is a barrier to effective internal risk control: A. The company monitors control efforts continuously. B. Control processes include detailed audit trails. C. Employees understand the need for control. D. Managers override control processes.

99. D Managers override control processes. An internal control system consists of procedures and practices designed to ensure compliance, protect resources, and increase reliability of company data. When managers fail to follow procedures, they hinder the company's ability to control internal risks. Maintaining detailed audit trails, communicating the importance of internal risk control to employees, and continuously monitoring the control efforts are actions that help the business control internal risks.